JP Morgan agrees to $4.5bn mortgage settlement with 21 investors

U.S. investment bank JP Morgan has agreed to pay 4.5 billion dollars to investors for misrepresenting the asset quality of 330 residential mortgage-backed securities.

According to the BBC, the bank has reached a deal with 21 major institutional investors, who lost money on mortgage-related securities during the financial crisis.

However, the deal is yet to be accepted by trustees for the trusts that hold the securities.

These misrepresented securities were issued between 2005 and 2008 by JP Morgan and Bear Stearns, which the bank took over at the outset of the crisis, the report added.

Last month, JP Morgan had agreed to a separate, preliminary 13 billion dollars deal with the U.S. government over mortgage securities.

According to the report, a final settlement with the U.S. Justice Department is expected to be announced soon.

Mortgage-backed securities were special financial products, which contained a mix of investments, but they were originally supposed to be risk-free home loans, created by many investment banks during the financial crisis.

However, when the US housing market collapsed in 2007, the value of these assets fell sharply and the credit markets seized up. So, the governments had to bail out the balance sheets of many banks.

Meanwhile, JP Morgan is alleged to have sold out the mortgage-backed assets, knowing well that many of the home loans posed serious risks.